1. Swiss Army: Diversifying intoSwiss Army: Diversifying into
the fragrance business (Case 4)
Stefan Kälin
25th January 2015
Stefan Kälin
UNIVERSITY OF FRIBOURG - FACULTY OF ECONOMICS & SOCIAL SCIENCES
iimt – Bd de Pérolles 90 – 1700 Fribourg – www.iimt.ch
25th January 2015

2. Case SummaryCase Summary
What is the case about?
• Victorinox the manufacturer of the famous Swiss Army Knives acquired in 2005• Victorinox, the manufacturer of the famous Swiss Army Knives, acquired in 2005
its main competitor, Wenger S.A.
• Prior to this acquisition, Victorinox offered five product categories: Swiss Army
Knives cutlery timepieces (watches) luggage and fashionKnives, cutlery, timepieces (watches), luggage and fashion.
• All categories had one thing in common: they were an expression of the values
behind the legendary „Swiss Army Knife“ and thus associated with typical Swiss
values like quality, innovation, reliability, functionality and iconic design.values like quality, innovation, reliability, functionality and iconic design.
• The acquisition also included Wenger‘s watches, luggage and its fragrance label.
• The head of marketing at Victorinox is asked to present a plan to the CEO about
how best to deal with the newly acquired fragrance business unit.y q g
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3. Q1a.: What should Victorinox do with the newly
acquired fragrance business unit? Should Victorinoxacquired fragrance business unit? Should Victorinox
diversify into the fragrance business? Why? How?
Criteria Pro Contra
Fragrance industry - Enormous market potential ($23.5
billion) of which 65% in the premium
- Varying local rules (product
components, labeling & packaging)
market (in line with Victorinox’s
position)
- Positive industrial forecasts
- Only some tariffs as barriers in
emerging economies
- Wide range of chemicals needed
- Substantial start-up funds needed
emerging economies
- Innovation is important – one of
Victorinox strength
Victorinox’s resources & capabilities - History showed that V has the ability
t f ll t f b d
- No prior experience in the
f i d t ( lth hto successfully transfer brand
attributes to other product
categories
- Victorinox has a large number of
shop-in-shop retail locations
fragrance industry (although
existing know-how in acquired
company Wenger S.A. which did
not bad ($9.4 m by 2005)
Because of the above mentioned criteria and their in sum positive evalution I would
shop-in-shop retail locations
(department & speciality stores most
dominant with 55%)
- Existing strong brand name
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Because of the above mentioned criteria and their in sum positive evalution, I would
recommend Victorinox to diversify into the fragrance business!
(Typical situation for the application of the McKinsey approach (couldn‘t do it due to time restrictions!)

4. Q1a.: What should Victorinox do with the newly
acquired fragrance business unit? Should Victorinoxacquired fragrance business unit? Should Victorinox
diversify into the fragrance business? Why? How?
A lot of elements in favour of a successful diversification lie to the companies feet:A lot of elements in favour of a successful diversification lie to the companies feet:
• Make use of what customers will associate with Switzerland, e.g. the beauty of the
Swiss mountains (for example on packaging, for advertisment etc.)
• Make use of what existing customers associate with Victorinox‘s products e gMake use of what existing customers associate with Victorinox s products, e.g.
outdoor experience (wind and weather, sun, refreshing water, wood etc.)
• Make use of the existing know-how ex-Wenger employees possess
• Make use of what customers associate with the company brand „Victorinox“p y „
• Make use of the established realtionships with suppliers of primary materials
Wenger brought into Victorinox
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5. Q1a.: What should Victorinox do with the newly
acquired fragrance business unit? Should Victorinoxacquired fragrance business unit? Should Victorinox
diversify into the fragrance business? Why? How?
• Transfer the spirit of the „Original Swiss Army Knife“ into the world of
fragrances. How?
L t th l t th ith th i t bli h d l ti hi t li f• Let the employees together with their established relationships to suppliers of
primary materials create a fragrance that incorporates all the above mentioned
and the following criteria: refreshing, icy, woody, dynamic, vital, open, romantiscm,
lakes flowerslakes, flowers
• In an initial step, create one fragrance for men, a seperate one for women
• Be innovative: Offer for example a flacon customers can refill themselves
• Advertise directly to consumers (initially give away free samples in the shop in shop• Advertise directly to consumers (initially give away free samples in the shop-in-shop
retail locations, later on, sale it there – as „Abercrombie & Fitch“ is doing it)
• Get retailers in the premium segment to like and stock up on the fragrance
• In terms of th product communication matrix a product adaptation“ would be theIn terms of th product communication matrix, a „product adaptation would be the
most promising strategy.
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6. Q1b.: Should Victorinox use ist own brand or
should it adopt another brand to promote its lineshould it adopt another brand to promote its line
of fragrances?
• Victorinox has a very strong company brand. I rommend to use this sustainable
competitive advantage and to use its own brand name to promot its fragrance line
(e.g. „Victorinox Swiss xy“).
• However, the company is in the very lucky situation that it also has a very strong
product brand, the „Swiss Army Knife“. It could transfer the spirit of
their profit-flagship, the „Original Swiss Army Knife“, into the world of fragrances.
Recommendation: Make use of this and also promote the fragrance line under
S i A “„Swiss Army xy“.
• Situation in 2010: Victorinox has two fragrance families:
• „Victorinox Swiss Unlimited“ (for men) and
S ( f f f )
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• Swiss Army (three moods for men, two fragrances for women)

7. Q2: How can Victorinox best compete and
position its fragrance products in a market whereposition its fragrance products in a market where
it has no prior experience or brand awareness?
• In terms of competition, I would recomend Victorinox to persue a differentiation
strategy: Create a fragrance that is uniqe and that reminds customers of the
existing brand attributes!existing brand attributes!
• Suggestion for a marketing mix: Product: As many
unifying basic
features as
Price: Price
premium as all thefeatures as
possible, as few
adaptations to local
tastes as necessary.
Innovation (refill)
premium as all the
products in the other
product lines have!
Place: Sales through
Promotion:
Free samples in own
existing retail
l ti t b
Marketing-
Mix
g
shop-in-shop retail
locations, premium
retailers and e-
commerce
locations; get buyers
from premium
retailers to like it;
social media and
public relations
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(press)

8. Swiss Army: Diversifying intoSwiss Army: Diversifying into
the fragrance business (Case 4)
BAKUP SLIDES
Stefan Kälin
25th January 2015
Stefan Kälin
UNIVERSITY OF FRIBOURG - FACULTY OF ECONOMICS & SOCIAL SCIENCES
iimt – Bd de Pérolles 90 – 1700 Fribourg – www.iimt.ch
25th January 2015

9. Market overview
The global fragrance industry
The global fragrance industry, a $23.5-billion market (2005)
Market share per region (%)
1% 1%
Market share per category (%)
28%
9%
8%
0%
Latin America
Western Europe
North America
43%
13%
1% 1%
Premium women's
fragrances
Premium men's
fragrances
Mass women's
26%
19%
9%
North America
Eastern Europe
Africa
Asia
Australia 21%
21% fragrances
Mass men's fragrances
Premium unisex
fragrances
Share per distribution
h l (%) b l 2000Australia 21% fragrances
Mass unisex fragrances
27%
9%
4%
1% 1%
channel (%) by early 2000s
Deaprtment Stores
Speciality StoresPositive industrial forecasts:
G i iddl l i i 27%
29%
15%
14%
Direct Sales
Pharmacies/Drugstores
Grocery Stores
Discounters
- Growing middle classes in emerging
markets (BRIC countries)
- Demand for fragrances was rapidly
growing among late teens to middle age
(Generation Y)
The fragrance
industry is very
fragmented!
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29% Outdoor Markets
Other

10. VictorinoxVictorinox
• Core company values: quality, innovation, functionality, iconic design
• 734 employees (2005) in 8 countries on 3 different continents
• Largest knife manufacturer in Europe Number of employees• Largest knife manufacturer in Europe
• Daily Production (2005):
• 28‘000 Swiss Army Knives (6 million/year)
• 32‘000 Multi-Tools (7 million/year)
19
45
Number of employees
Brazil
Chile
• 60‘000 household and professional knives
• Worldwide export of approx. 90% of total production
• Total sales (2005): $217 million vs $29 million for Wenger
138
63
290
China/Hong Kong
India
Japan
Mexico
S l (i $ illi ) d t 84
87
8
Polan
North America
30
7
Sales (in $ million) per product
category (2005)
Wenger’s sales (in $ million) per
166
14
Knives
Watches
Luggage
Apparel
16
9
product category (2005)
Knives
Watches
compared
to Wenger‘s
sales
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166 16
4
Fragrances

11. Victorinox‘s Key MilestonesVictorinox s Key Milestones
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12. Thank you
for your attention!for your attention!
UNIVERSITY OF FRIBOURG - FACULTY OF ECONOMICS & SOCIAL SCIENCES
iimt – Bd de Pérolles 90 – 1700 Fribourg – www.iimt.ch